THE FY2008 PROJECT EVALUATION AUDIT OF THE CHECKOFF-FUNDED NORTHEAST & NORTHERN VIRGINIA AR: P-04-2008 FOOD SERVICE MAY 2009 SUBMITTED TO: The Joint Evaluation Advisory Committee SUBMITTED BY: Ann Ocaña Ann Ocaña Consulting 2461 Spruce Street Denver, CO 80238
BEEF BOARD FY2008 NORTHEAST & NORTHERN VIRGINIA AUDIT FOODSERVICE MARKETING EXECUTIVE SUMMARY The beef checkoff is one of the country s most visible agriculture checkoff programs and it s Beef. It s What s for Dinner tagline has become well known. Through a strong mix of marketing efforts the program has succeeded in increasing the overall demand for beef. The objective of this report is to provide an assessment of the FY2008 Northeast and Northern Virginia Foodservice Authorization Request (AR) and make recommendations for possible improvements. The following conclusions and recommendations are based on a thorough review of available research and information; interviews with program staff and select producers in the Northeast; and my experience and expertise. In reviewing the core elements of the AR it is clear the foodservice marketing efforts have been effective. At the same time there are opportunities to further improve the effectiveness of the program moving forward. The following outlines the primary conclusions: Augmenting the national foodservice program in the Northeast is critical due to the opportunity that exists for beef Overall the planning process does a good job of involving all constituents and strives to integrate national strategies. A new strategic approach should be considered Foodservice promotions have been operator driven and targeted at regional chains. While operators report a lift in sales, the strategy is not cost effective The foodservice channel is highly fragmented, making it labor intensive and difficult to reach enough critical mass efficiently. Opportunities exist to shift the relationship focus to other channel influencers who can leverage sales and marketing networks much more efficiently. Tradeshows create increased exposure for beef and have been beneficial in generating relationships. Opportunities exist to better leverage this tactic in the future Opportunities exist to formalize evaluations and enhance the relationship database Integration of culinary partnerships with public relations initiatives has the potential to be very powerful Clearly many efforts have been made with positive results but some dramatic shifts in strategy need to be made to maximize the investment. The following recommendations are opportunities to enhance the existing program and better position beef from a foodservice perspective: Redefine the foodservice strategy to better leverage limited resources Institute formal evaluations, including key measurements, with all future promotional spending to facilitate future planning Evolve and enhance foodservice database to include more measurable data Maintain and develop relationships with prominent chefs and culinary educators Continue to leverage key versatility messaging and incorporate with any trade initiatives 2
INTRODUCTION The beef checkoff is one of the country s most visible agriculture checkoff programs and it s Beef. It s What s for Dinner tagline has become well known, with 84% aided recognition level among consumers. Through a strong mix of marketing efforts the program has increased the overall demand for beef. The Annual Beef Demand index has been challenged the past few years as a result of economic pressures. While demand decreased 3.7% from 2007 to 2008, the demand index still remains up 9% compared to 1997. Protein share of stomach remains competitive as chicken continues to thrive and experience growth. With the challenging economic environment it is critical that the beef program maintains and enhances its marketing efforts. Furthermore, with pressures on assessments it is more critical than ever that marketing programs work as efficiently and effectively as possible. Annually the Beef Board reviews and evaluates all aspects of the Beef Checkoff Program to ensure program effectiveness. The Northeast & Northern Virginia foodservice programs were developed to augment national efforts in the Northeast. The objective of this report is to provide an in-depth assessment of the FY2008 Northeast foodservice programs and make recommendations for possible improvements. The following conclusions and recommendations are based on a thorough review of available research and information; interviews with program staff and select producers in the Northeast; and my experience and expertise. OVERALL ASSESSMENT AND CONCLUSIONS The staff and producers I spoke with all recognize the value of supporting foodservice initiatives in the Northeast. While the objectives were achieved, the staff believes changes need to be made moving forward. I concur that efforts are needed toward the foodservice channel and I have identified opportunities to help evolve the program into the future. The following outlines the primary conclusions. Augmenting the national foodservice program in the Northeast is critical due to the opportunity that exists for beef Maintaining efforts and building demand in the Northeast region of the country is critical. The Northeast represents only 6% of total beef checkoff assessments as it is made up primarily of cattle deficit states. In contrast, this region represents nearly 25% of the US population and through the retail supermarket channel represents 26% of all purchases nationally, which clearly illustrates the tremendous buying power. In terms of channel penetration, while numbers are not available for the Northeastern region, the foodservice channel accounts for nearly 50% of the beef demand nationally or over 8 billion pounds annually. Supplementing these efforts is critical because of the significance of this channel, the limited state beef council dollars and the strong buying power in the Northeast. Overall the planning process does a good job of involving all constituents and strives to integrate national strategies. A new strategic approach should be considered In terms of overall planning, the staff does an excellent job of engaging all the constituents including understanding national plans and meeting with the local state beef council leadership within the Northeast region. Strategies are developed and tactics outlined to meet those strategies and most are aligned with the national foodservice plan. The national plan is primarily focused on trade advertising and public relations where the Northeast focuses primarily on relationship development and cooperative promotions. While supplementing the national effort with cooperative promotions makes sense on the surface, it is a very difficult strategy to execute effectively and efficiently because of the fragmented nature of the channel coupled with the limited budget. A new approach and strategy is needed for this initiative to remain viable into the future. 3
Foodservice promotions have been operator driven and targeted at regional chains. While operators report a lift in sales, the strategy is not cost effective Foodservice promotions have been successful in generating additional beef menu offerings, resulting in incremental beef sales. In 2008, over $45,000 was invested in six cooperative foodservice programs. Overall, the programs were beneficial in fulfilling the objectives of increased beef menu placement and driving sales. However, some of the promotions have not been as efficient as recent national programs. First of all, only one of the Northeast programs attained national benchmarks for partnership participation. The standard of measurement for national programs targeting partner contributions is 30 times the value of the checkoff investment. In 2008 Charlie Brown s restaurant executed two promotions with one achieving the 1:35 checkoff to partner investment benchmark. Between the two promotions over 10 million media impressions were created which helps to create awareness for beef in the marketplace. While all other partners did provide value, they were well below the national standard. Furthermore, for those Northeast promotions where sales data was provided, the beef checkoff investment per pound is estimated at $.31 as compared to the national standard for these types of investments at $.04 to $.15 per pound. In total, when compared to national benchmarks nearly all of these promotions are underperforming. The one exception appears to be Restaurant Depot, a supplier to restaurant operators that functions very much like a club store. Through the checkoff investment, they reported an 8% increase per week in total truckloads of beef, resulting in approximately 100,000 incremental pounds of beef. Restaurant Depot would be considered a channel influencer as they are a middleman selling beef to numerous restaurants. Channel influencers have the potential to impact beef sales much more efficiently and at higher volume levels. Timing Fall 2007 Event Applebee's Wait Incentive Checkoff Investment $2,004 Partner Investment Natl Program Fall 2007 Restaurant Depot $6,800 $7,000 Dec-07 July/Aug 2008 May- July 2008 Jun-08 Charlie Brown Flat Iron Steak $10,000 $350,000 Greenleaf Grille $6,500 $20,000 Hoss' Father's Day Charlie Brown Ranch Steak Launch $6,205 $11,250 $15,000 $235,000 Results 33,500 steak sold - 28% increase Approx 100,000 lbs per week - 8% increase 36,870 steaks sold up 54% Over $9,000 per week in steak salad sales 35,814 steaks sold and now permanent part of 23,367 steaks sold Checkoff invest per lb $0.43 Checkoff to partner investment ratio $0.07 1:1 $0.95 1:35 $0.28 1:2 $1.03 1:15 Total $46,509 $623,250 $0.31 1:13 Notes Extension to National Program 2 FSI and Menu Inserts - 7.3 million 1:3 POS POS and Advertising FSI and Menu Inserts - 3.2 million impressions 4
The foodservice channel is highly fragmented making it labor intensive and difficult to reach enough critical mass efficiently. Opportunities exist to shift the relationship focus to other channel influencers who can leverage sales and marketing networks much more efficiently. The foodservice channel is highly fragmented and is very localized. While national foodservice chains continue to grow, they have not been as dominant as compared to the supermarket industry where the top 10 chains account for approximately 60% of the grocery volume. While great effort and success have gone into establishing 56 relationships with smaller foodservice chains in the Northeast, this is not even a fraction of the region s foodservice channel. As a frame of reference, there are approximately 7,000 supermarket locations in the Northeast and over 110,000 restaurant locations in the same footprint. With only one staff person committed to this channel, it would be very difficult to achieve enough critical mass to move the needle on beef sales. Furthermore, the staff has commented that it is difficult to engage operators in this channel. With limited resources it may be far more cost effective to target channel influencers such as broadline foodservice distributors. Not only do they have highly targeted marketing vehicles but they also have much larger sales teams with a greater frequency of contact. Tradeshows create increased exposure for beef and have been beneficial in generating relationships. Opportunities exist to better leverage this tactic in the future Tradeshows were utilized as a strategy to help build relationships and increase overall awareness for beef. In 2008, two tradeshows were attended: the New York Restaurant Association show and Connecticut Hospitality Expo. Tradeshow participation did help to establish new foodservice relationships with key industry representatives and provided exposure to a large audience. While both of these venues provided exposure and opportunities to develop relationships, there are other tradeshow opportunities and targets that should be considered in future planning. As an example, most broadline distributors utilize tradeshows as a part of their strategy in each of the major markets. These proprietary shows are often buying shows providing exposure to a potentially wider audience and the opportunity to meet with decision makers who are most likely placing orders right at the tradeshow. While the beef checkoff program does not have a product to sell directly to an operator, exhibit only opportunities often exist or this could be done in cooperation with a beef brand partner. Furthermore, whenever possible it s important to leverage tradeshow participation beyond the booth. As an example, the Connecticut Hospitality Expo included the Flat Iron Chef Challenge, which helped facilitate and engage interest with the new Flat Iron steak. The missed opportunity was overlaying this effort with both trade and consumer public relations. Utilizing media relations, awareness could have been created with the challenge including the announcement of the winner. Opportunities exist to formalize evaluations and enhance the relationship database Currently, there does not appear to be a formal post promotion evaluation and there is a lack of consistency in obtaining measurements to evaluate the total effectiveness of promotions. Two key measurements that should be tracked and evaluated for every cooperative promotion are: cost per incremental pound of beef sold and the check off to partner investment ratio. This means the foodservice partners must commit to providing consistent volume and sales information. These measurements can be used to evaluate future opportunities to ensure promotions are being conducted both efficiently and effectively. Finally, the staff has developed a database of contacts that maintains basic levels of information. It includes both a combination of operators, culinary educators and even a couple 5
of distributor contacts. Maintaining a database is important but the information is limited and the current database needs to be enhanced to identify relationship segments and sales measurements. Integration of culinary partnerships with public relations initiatives has the potential to be very powerful The staff has developed relationships with culinary educators, including the Connecticut Culinary School, which I believe is valuable in multiple ways. One of the primary benefits includes establishing relationships with up and coming chefs. Ultimately, though, the opportunity lies in the ability to leverage these relationships in both trade and consumer public relation activities. An additional opportunity is to identify and develop relationships with a core group of prominent chefs who could be leveraged and utilized as testimonials in integration with public relations strategies. RECOMMENDATIONS FOR THE FUTURE Clearly many efforts have been made with the foodservice initiative resulting in incremental beef sales. However, investments to drive these incremental sales are costly and dramatic shifts in strategies need to be made to maximize the investment. The following recommendations are opportunities to enhance the existing program and better position beef in the foodservice channel. Redefine the food service strategy to better leverage limited resources Moving forward, it is critical to redefine the foodservice strategy to maximize the beef checkoff investment in the Northeast. I recommend the focus shift away from developing relationships one operator at time to leveraging channel influencers including distributors. Broadline distributors in particular are highly motivated to sell center of the plate items (primarily proteins) as it represents one of the largest and most profitable categories in their sales mix. As an example, identify one of the leading broadliners in each of the major geographies (e.g. Reinhardt, Sysco or US Foodservice) to partner with to execute a promotion around a new item introduction. Broadline distributors generally have large sales teams that have established and loyal relationships with foodservice operators. In addition they have several marketing mediums to leverage including trade shows, direct mail, point of sale materials and proprietary magazine publications. A multi-dimensional program could be developed to include some of the following tactics: direct mail to targeted operator segments (e.g. white table cloth and casual dining restaurants) featuring a product announcement and recipe; an advertisement using the BEEFlexible creative in their proprietary publication; participation at their proprietary tradeshow where the new item could be featured along with recipes; and a sales incentive to the distributor sales representatives (DSR s) based on incremental new item sales. Another idea would be to launch a chef challenge (beef s mini version of Top Chef) through the broadline distributor. It is essentially a contest that would occur in multiple rounds over several weeks based on menu ideas and recipe submission. This type of promotion creates an opportunity to continually communicate with foodservice operators while engaging them with beef (healthy cooking utilizing several beef varieties throughout including new products). Partnering and leveraging the broadline distributor is important as it provides access to a wider database of chefs and amplifies the contest through their sales network. DSR s could have an incentive to get their customers involved in the challenge. Furthermore, there could be a public relations opportunity toward the end of the contest where chefs are featured on a local morning show cooking their recipes. 6
A final example is leveraging wine distributors who have sales representatives on the street frequently working with operators. Recently, the national program put together collateral on wine pairing featuring renowned wine expert and author of The Wine Bible, Karen MacNeil. This guide reinforced a study proving consumers who order beef will typically order red wine. There is great incentive to the operator to sell more wine as it is a high profit margin segment. Wine distributors could be armed with brochures created nationally that could also include material about a new product or recipe. Finally, I would recommend that this strategy be tested to ensure effectiveness. As an example, you could select three markets and test a different approach in each of these markets. Institute formal evaluations, including key measurements, with all future promotional spending to facilitate future planning Another opportunity is implementing a more formalized process in evaluating the various programs. This includes setting quantifiable objectives in terms of overall sales lift and return on investment. Currently, there are limited measurements in place to track promotional lift, making it more difficult to truly evaluate whether or not a program was successful. Furthermore, I would recommend developing a template that is utilized for every cooperative foodservice promotion. This template could be used for setting criteria when researching future promotions and tactics. The evaluation template should include: Promotion description Promotion objective Total checkoff investment Detail on what the checkoff investment provided Total partner contribution Sales data (in pounds) Investment per pound of incremental volume Ratio of checkoff investment to partner contribution Strengths of the program Weaknesses of the program This evaluation would apply to working with distributor partners as well. Broadline distributors have the ability to provide information including overall meat and beef volume levels to truly evaluate the effectiveness of these efforts. Evolve and enhance foodservice database to include more measurable data The staff has done a good job of creating an initial foodservice database; however it needs to be expanded for improved strategic account planning in the future. I would recommend including the following information: Relationship type (operator, distributor, educator) Estimated annual meat sales Estimated annual beef sales Annual tracking of executed promotions Annual tracking checkoff dollars invested (if applicable) Maintain and develop relationships with prominent chefs and culinary educators As mentioned previously, chefs and educators can be powerful both within their peer group and also with consumers. I recommend indentifying a short list of prominent chefs in each market. Relationships need to be established which may include a token testimonial fee. These chefs could be used to support public relations activities and efforts as well. 7
Continue to leverage key versatility messaging and incorporate with any trade initiatives If any trade marketing is incorporated into the plan, it should leverage the BEEFlexible campaign at all times. The overall creative is award winning and the message well targeted at the foodservice channel. SUMMARY Supplementing the national foodservice program and supporting efforts in the Northeast is critical due to the potential opportunity that exists for beef. Great effort and focus has gone into the Northeast initiative with limited success stories as the channel has been difficult to penetrate based on the current resources and strategy. Moving forward it is critical to shift focus and redefine the strategy so that checkoff dollars are better maximized. This means leveraging other influencer networks to cast a larger net in getting more beef on more menus. Furthermore, formalization of promotion evaluations is critical as the strategy evolves to determine if this is the best and most effective use of checkoff dollars. 8